Personal debt maintains delicate inflation balance

20/01/2010

Personal debt is one of the methods which the Bank of England (BoE) is relying upon to hold down inflation.

Criticising the Bank for not making the effort to properly "fine-tune" inflation, David Kuo, director of the Motley Fool website, claimed that household debt was playing a role in holding off inflation levels.

He said: "The Bank of England is relying on a mixture of consumer lethargy and the burden of household debt to hold down demand."

Mr Kuo added that wage inflation would be held down by a "stubborn" trend of unemployment and urged consumers to take matters into their own hands to ensure that any idle money is invested in order to give the economy a sustainable boost while keeping inflation steady.

Severe rates of high inflation could prove problematic for people with debt problems as the general level of goods and services can rise to a rate which far exceeds their budget.


Kevin Still, director of EuroDebt, commented: "Most consumers are rather cynical about these type of economist statements where 'Joe Public' is expected to perform in a pre-meditated fashion when there is no incentive to invest and clearing down personal debts is a priority.

He added: "Job security remains very depressed and disposable income is still being squeezed. If interest rates have to go up because of measure to control inflation then this will further penalize millions of homeowners, who may need to look at non-borrowing debt solutions."

Tags; Current UK Economy,

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